It can be frustrating if your small business is denied for a loan. Whether that’s happened to your company in the past or you’d like to avoid it in the future, keep reading to learn more about why lenders deny borrowers. This article also looks at some steps you can take to strengthen your financing applications.
Bad Credit History
Bad credit history will scare many lenders off immediately. To overcome this, you may need to gather enough money for a larger down payment. Other steps include obtaining your business’s credit report and fixing any errors on it, reducing your outstanding debt, and making payments on time to raise your credit score.
Business Plan Problems
If your small business has a nonexistent or shaky business plan, lenders may be hesitant to become involved with your company. To come up with a solid business plan, check out this guide from the Small Business Administration.
Try not to apply for too many loans at one time. Lenders may view this as a sign that you are in dire straits and shy away.
Using the Wrong Lender
While it’s not advisable to send out dozens of loan applications, it is possible that you just need to shop around some more to find the right lender. Take your time to investigate alternative and traditional lending sources. For instance, some alternative lenders may be more lenient when it comes to your credit history.
The Wrong Attitude
During the loan application process, it’s possible for any small business owner to eventually feel tired and worn out. However, it’s still important to show enthusiasm and passion for your company when you interact with lenders. The more you show that you’re invested in your company, the more likely lenders are to have faith in you as a borrower.
For more tips on the world of business financing, take a look at Avery James’s other blog posts.